AT&T: T-Mobile sucks (and we’d like to buy it for $39 billion)

AT&T has just filed its T-Mobile buyout documents with the government. In it, …

After reading AT&T's massive argument (PDF) for why the government should allow it to purchase T-Mobile, you might wonder just why AT&T wants the smaller company at all. And you might have a few questions about AT&T's own network, which the company says will shortly be under severe capacity constraints that its rivals won't face.

The whole document is a rather amusing exercise in making both AT&T and T-Mobile look like underdogs in a field of unbeatable competitors. Actual quote from AT&T: "With sharply declining prices, dazzling innovation, soaring output, enormous product differentiation, new entr[ies], and fierce advertising, the intensity of the competition in the US wireless marketplace is extraordinary."

"T-Mobile is not an important factor in AT&T’s competitive decision-making."

"As a standalone company, however, T-Mobile USA would continue to face substantial commercial and spectrum-related challenges. It confronts increased competition from industry mavericks such as MetroPCS, Leap, and others; its percentage of US subscribers has been falling for nearly two years; and it has no clear path to LTE."

"T-Mobile USA, in contrast to others, does not have a differentiated network position. T-Mobile USA has admitted that it suffered from its late transition to a 3G network, and unlike Sprint, which first promoted a 4G network, T-Mobile USA’s HSPA+ launch appears to have been lost among other carriers’ 4G messaging."

"AT&T does not believe that T-Mobile USA has a particularly compelling portfolio of smartphone offerings as compared to AT&T, Verizon, and Sprint."

"To the extent that T-Mobile USA’s prices are lower than those received by AT&T and Verizon Wireless for otherwise comparable subscribers, T-Mobile USA’s lower prices have not stimulated growth in its share of retail subscribers. This indicates that other aspects of T-Mobile USA’s service are in some way lacking."

And it's not just T-Mobile; AT&T can't say enough bad things about the imminent problems with its own network:

"AT&T’s network-capacity challenges, however, are not just 'looming' a few years down the road—they are here today, the product of AT&T’s mobile broadband leadership and its need to support multiple generations of services. And although other providers’ public statements indicate that they have sufficient capacity to cover their needs until additional spectrum is made available via auction several years from now, AT&T must move more quickly."

"In many markets where T-Mobile USA has spectrum, AT&T’s capacity constraints also prevent it from dedicating enough spectrum to launch LTE, deploy it optimally, or meet expected demand. For example, in [Redacted by AT&T], AT&T lacks spectrum to deploy LTE at all."

"From a consumer’s perspective, the capacity constraints confronting these companies, if unaddressed, would translate into more dropped and blocked calls, slower speeds, and access to fewer and less advanced applications."

Finally, AT&T's competitors are unbelievably powerful, awesome companies. They are, quite probably, run by gods living among us mortals. (Also, in case regulators didn't notice it in the many other statements on the matter, T-Mobile continues to be non-mavericky and sucktacular.)

"Verizon Wireless is the nation’s largest wireless provider with a leading reputation for high-quality network performance, and it competes with AT&T in almost every local market. It has an exceedingly robust spectrum position Verizon Wireless often targets AT&T in its commercials and asserts that Verizon’s network is superior to AT&T’s more congested counterpart."

"Sprint has reversed recent trends and, in 2010, achieved successes that CEO Dan Hesse called 'unprecedented in the history of the U.S. wireless industry' Sprint’s success contrasts sharply with T-Mobile USA’s own recent performance. Second, Sprint has achieved this early 4G success in part because of its exceptional spectrum position, which is far stronger than AT&T’s today."

"MetroPCS and Leap have now become the industry’s leading 'maverick[s],' a term that does not apply to providers that, like T-Mobile USA, are losing share Indeed, MetroPCS and Leap are now mentioned in the same breath with AT&T, Verizon Wireless, Sprint, and T-Mobile USA. And in a growing number of markets, these providers—and MetroPCS in particular—are estimated to have surpassed T-Mobile USA."

US Cellular is a "highly successful provider" that, according to AT&T’s internal estimates, "has double-digit and sometimes leading shares of many markets in which T-Mobile USA and AT&T also compete."

After dozens of pages of this, one starts to wonder just how AT&T and T-Mobile executives manage to tie their own shoelaces.

The rhetorical move here is an obvious one: play up competition in the wireless market, make AT&T appear to be in imminent peril without the acquisition, and show that AT&T isn't buying out a rival. There is some truth underlying the points made by AT&T here, but it does raise the question of why AT&T wants to acquire T-Mobile at all.

Hardly underdogs

Government Accounting Office

The company provides a host of reasons, but two are key: AT&T wants more spectrum, and more towers from which to utilize that spectrum. T-Mobile has both, and it already uses GSM technology throughout its network, as does AT&T. AT&T could just save its $39 billion and put up more towers of its own, but this is easier said than done; indeed, by buying T-Mobile, AT&T gets eight years of tower building at once. As AT&T describes the process:

To add a site, a provider must locate a suitable and available location, arrange to acquire the site through purchase or lease, comply with regulatory requirements that necessitate extensive studies and consultation, apply for and obtain building permits and zoning approvals, contract with third-party vendors to purchase the needed equipment, construct the site and associated backhaul, and then integrate the site into the network. This process can literally take years.

In the San Francisco/Bay Area market, for example, the zoning process alone—only a single step in this long, multi-step process—has taken AT&T an average of [Begin Confidential Information] [End Confidential Information] to complete The T-Mobile USA sites that AT&T could integrate represent more than eight years of new sites based on AT&T’s 2010 rate.

The trick for federal regulators is to look beyond the over-the-top sob story AT&T is selling and weigh the arguments on their merits. Opposition has been fierce, even from groups like CCIA, a DC trade group that actually counts T-Mobile among its members.

"The proposal is stunningly brazen," said CCIA today. "To combat their weak case, AT&T is mounting a massive lobbying and PR effort. Their aim is to convince key decision makers, and those they listen to, of the absurd proposition that having fewer choices of wireless carriers will not lead to less price, service and innovation competition."

There is some truth to the fact that the more wireless players there are, the less spectrum is available to each one. Of course, none of that would matter if roaming and radio compatibility were mandatory....

If the problem is spectrum, wouldn't roaming agreement be enough? Granted, they are running on different 3G frequencies now, but it's not like after the proposed merger all the T-mobile phones will stop getting 3G.

It's not like a prospective marriage where one partner is saying "you are ugly and have no prospects. Let's get married." There is not really any conflict between AT&T saying T-Mobile is a crappy company and saying they want to acquire T-Mobile. If T-Mobile were well positioned then they would be a more expensive(less attractive) acquisition and there would be less upside for AT&T. The point of buying them is that AT&T feels like it can do more with T-Mobile assets then T-Mobile can do independently. So it makes perfect sense for business.

There is some truth to the fact that the more wireless players there are, the less spectrum is available to each one. Of course, none of that would matter if roaming and radio compatibility were mandatory....

But that'd be too smart.

And they would cry Socialism from the mountain's highest peak, as the lands below burn in the heathen fires brought across the sea by the corrupted, twisted visage of wireless Gehenna that is Western and Central Europe.

Lo, the calls for a saviour would ring forth from the burning lands from these so oppressed people, for a shining corporate beacon of capitalism to properly and justly uplift them on high to the glorious age of wireless monopoly. Fear not this great change, for you will be risen again into a glorious return of increased fees for decreased service. For it is the divine will of the American Telephone and Telegraph that you are granted such a blessed privilege, that you be allowed to invest these tithes of not less than ten percent of your earned income, for the betterment of all mankind that exists within the circle of the holders of stocks, and the Chief Executive of Officers.

AT&T is playing down T-Mobile to alleviate anti-competitive concerns, besides, all AT&T wants are the towers.

Fixed. While I'm sure they'd like having a bunch more people giving them money, at least for a month or two, the main reason for the merger is that now they'll have a buttload of new towers, instead of having to apply for permits to build new ones.

AT&T is playing down T-Mobile to alleviate anti-competitive concerns, besides, all AT&T wants are the towers.

Fixed. While I'm sure they'd like having a bunch more people giving them money, at least for a month or two, the main reason for the merger is that now they'll have a buttload of new towers, instead of having to apply for permits to build new ones.

I'd almost guarantee you that the employees in T-Mobile lower on the totem pole(the ones who are lucky to still be allowed to work, much less have any pull in the larger goings on in the company) are watching this with bated breath. Anyone who has been in their position can tell you that these deals are practically death sentences for their jobs if the bigger company already has people that do what they're doing.

There is some truth to the fact that the more wireless players there are, the less spectrum is available to each one. Of course, none of that would matter if roaming and radio compatibility were mandatory....

But that'd be too smart.

And they would cry Socialism from the mountain's highest peak, as the lands below burn in the heathen fires brought across the sea by the corrupted, twisted visage of wireless Gehenna that is Western and Central Europe.

Lo, the calls for a saviour would ring forth from the burning lands from these so oppressed people, for a shining corporate beacon of capitalism to properly and justly uplift them on high to the glorious age of wireless monopoly. Fear not this great change, for you will be risen again into a glorious return of increased fees for decreased service. For it is the divine will of the American Telephone and Telegraph that you are granted such a blessed privilege, that you be allowed to invest these tithes of not less than ten percent of your earned income, for the betterment of all mankind that exists within the circle of the holders of stocks, and the Chief Executive of Officers.

Three Phones for the Elven-kings under the sky,Seven for the Dwarf-lords in their halls of stone,Nine for Mortal Men doomed to die,One for the Dark Lord on his dark throneIn the Land of Qualcomm where the Shadows lie.One Phone to rule them all, One Phone to find them,One Phone to bring them all and in the darkness bind themIn the Land of Qualcomm where the Shadows lie.

Being a former AT&T customer that moved to T-Mobile, I would have to disagree that T-Mobile's phone lineup is 'weak'. T-Mobile has always been at the forefront of handsets and willing to take risks. AT&T plays very conservatively in the handset market (Verizon was notorious with this until the iPhone appeared) and if it were not for Verizon scoring the iPhone, AT&T would have not expanded out to Android as much as they have today. I don't miss paying a 40% premium to AT&T since I moved to T-Mobile. I am definitely watching this acquisition very closely.

To the extent that T-Mobile USA’s prices are lower than those received by AT&T and Verizon Wireless for otherwise comparable subscribers, T-Mobile USA’s lower prices have not stimulated growth in its share of retail subscribers. This indicates that other aspects of T-Mobile USA’s service are in some way lacking.

Or that they don't have an iPhone? Personally I've had good luck with T-Mobile. But if ATT buys them, I'm going to Verizon.

There is some truth to the fact that the more wireless players there are, the less spectrum is available to each one. Of course, none of that would matter if roaming and radio compatibility were mandatory....

But that'd be too smart.

And they would cry Socialism from the mountain's highest peak, as the lands below burn in the heathen fires brought across the sea by the corrupted, twisted visage of wireless Gehenna that is Western and Central Europe.

Lo, the calls for a saviour would ring forth from the burning lands from these so oppressed people, for a shining corporate beacon of capitalism to properly and justly uplift them on high to the glorious age of wireless monopoly. Fear not this great change, for you will be risen again into a glorious return of increased fees for decreased service. For it is the divine will of the American Telephone and Telegraph that you are granted such a blessed privilege, that you be allowed to invest these tithes of not less than ten percent of your earned income, for the betterment of all mankind that exists within the circle of the holders of stocks, and the Chief Executive of Officers.

AT&T has just filed its T-Mobile buyout documents with the government. In it, AT&T says that T-Mobile is not a "maverick," its service is "in some way lacking," and it's missing a "particularly compelling portfolio of smartphone offerings." One is left wondering just how AT&T and T-Mobile executives manage to tie their own shoelaces. So why does AT&T want it?

Uh, who the fuck do they think they are kidding? Do they really think regulators are that stupid? Maybe they are but, man, this bullshit storm is just an insult to everyone's intelligence. This very defense of the acquisition is reason enough not to let it happen. Arrogant sons-of-bitches.

After reading AT&T's massive argument (PDF) for why the government should allow it to purchase T-Mobile, you might wonder just why AT&T wants the smaller company at all. And you might have a few questions about AT&T's own network, which the company says will shortly be under severe capacity constraints that its rivals won't face.

$39 billion would buy a decent chunk of the spectrum due to be recovered from TV broadcasters with piles of money left over for significant infrastructure upgrades. It would also allow the nominal competition to persist too.

Of course, if you have to spend $39 billion anyway, it's far better to spend it in such a way that you can recoup your expenditure faster because there are fewer competitors holding prices down. Can't put that in the report though.

This entire documents purpose is to try to convince regulators that it will not hurt competition in the market. So of course they are going to make these arguments:1 T-Mobile isn't competitive already.2 AT&T will be more competitive with T-Mobile then without T-Mobile.3 The remaining players in the market are already competing well so they will continue to compete well.

T'he real stretch here in my mind is the first point.

As an AT&T subscriber I hope it does go through. I can't see any other way they will be able to build out their network quickly enough to actually improve service.

The reason is pretty simple - become monopoly (or colluded duopoly with Verizon), raise prices (already happening), bribe politicians some more to enact laws to allow even more rapage of your customers.

So, basically their message is: "Oh dear, it's so hard to run a mobile network with all these smartphones about. We really need some help here."

Fuck that.

AT&T have been consistently raking in $billion-plus profits for how many years now? Despite the economic problems that the rest of us mere mortals have been having, they made a little over a billion last year on $30-odd billion in revenue, and over $2 billion the year before that. Hell, they just announced yesterday that their first-quarter income was up 39% over last year.

Basically, if they're struggling, it's because they haven't been spending what they should on infrastructure to deal with demand. It's not as if Let's also not forget that demand largely stems from the original iPhone exclusivity deal. It's self-inflicted, and they haven't seen it particularly necessary to do much to their network to handle the load. Their lack of investment is now biting them, big time.

Companies that consistently post profits with 10 digits in 'em don't need assistance from the government, and should be barred from shovelling money in that direction in return for any sort of consideration...

While I'm as satisfied with US Cellular as any of their highly satisfied customers would be, it's really disingenuous to argue that US Cellular is more successful in their markets than AT&T and T-Mobile. I can't even consider them because they have no service at all here, while US Cellular has 4-5 bars. Perhaps if AT&T and T-Mobile put in some effort, they'd do a little better. It's not like US Cellular has the newest phones or anything.

When they acquire T-Mobile, I'm going to Sprint. Fuck them. I hated working for them, I hated working with them, I hate their willingness to bald-faced lie to the country for more profits (though I understand it). I never thought I'd say it, as I worked with Sprint for too long, but they look like the last sane player left. Verizon's too damn expensive for us proles.

AT&T has just filed its T-Mobile buyout documents with the government. In it, AT&T says that T-Mobile is not a "maverick," its service is "in some way lacking," and it's missing a "particularly compelling portfolio of smartphone offerings." One is left wondering just how AT&T and T-Mobile executives manage to tie their own shoelaces. So why does AT&T want it?

Uh, who the fuck do they think they are kidding? Do they really think regulators are that stupid?